The paradox of loyalty

In this economy the most pressing business imperative is customer loyalty. You better be thinking hard about how you are going to retain your customers over the next two years (even if you lose some real money doing it).

"I had lunch with my kids at our local Middle Eastern restaurant in Park Slope, Brooklyn, yesterday. It has been there for a long time in a neighborhood that has exploded with cool cafes. The smell of warm pitas, fresh from the oven, practically brought my kids to tears. This place is getting more and more attractive to me these days. They provide good, cheap, fresh food – I can stuff the whole family for less than $30. But that's not all: at the end of the meal they always bring out some free honey semolina cake along with the check (they divide one standard portion into four little cubes for us). What a wonderful bonus...or maybe not. I would argue in this economy that cake is a critical element of their survival strategy. My neighborhood is flush with tasty restaurants competing for my shrinking budget. They all better be thinking of new ways to delight me.

In this economy the most pressing business imperative is customer loyalty. You better be thinking hard about how you are going to retain your customers over the next two years (even if you lose some real money doing it). I am paying close attention to the businesses that get this. The ones that are working extra hard to recognize regular visitors like me, even if I rarely buy (and never at full price). My presence in the store alone has rising business value these days.

This is the great challenge of the Google economy in a recession - we all know how much our eyeballs are worth. If you are willing to pay $$ for me to see a tiny advertisement alongside a set of search results - how much is my visit to your store worth? If I pay you for your products or services then you should pay me for my time and attention - right? And this doesn't even begin to recognize the business value you realize from me wearing your stuff or driving your car. Think about all the extra 'eyeballs' I am reaching. (For two interesting takes on this check out these posts by Rob Walker and Jan Chipchase).

This is the paradox facing every business today and it will be a huge area of innovation over the next two years. You can read it in the paper every day. Here are two recent articles that ran in the New York Times Business section on the same day, one on Starbucks and the other on the hotel business and how they are adopting game technologies. As a design firm we are always looking for new ways to engage and inspire people. It starts with talking to your customers and observing what they do. Trying to identify fresh opportunities to delight them. Some of the best ideas may have little do with your core products and services. Look at the auto industry: one of their biggest challenges is that I have NO reason to visit a dealership unless I want to buy a car.

Every business today should take a fresh look at the context surrounding their customer interactions. The goal is to identify the highest value, least expensive way to delight them. Here are some guidelines:

1. Make sure it is something that your customers encounter regularly (not something reserved for special occasions).2. Make sure that it will be visible to others.3. Make sure it is available to non-customers.

Businesses that survive will get very good at identifying the cheapest service that has the most impact in this area. But they won't stop there – they will keep on innovating and trying new things to stay ahead in this game. These skills are not just crucial to their immediate survival but will position them to thrive in the future. The good news is that more and more customers are sharing their stories about these recession-era delights. So please send me yours. If I had any money left to start a new stock portfolio this is how I would do my research."